Original article by Timothy Maxwell, sourced from CurrencyNews.co.uk.
Title: EUR/USD Forecast: Market Watches 1.1780 Break as Potential Game-Changer
The euro to US dollar (EUR/USD) exchange rate has been range-bound over recent weeks, but market analysts are increasingly focused on one critical resistance level: 1.1780. Should the pair convincingly break above this barrier, it could trigger a substantial shift in sentiment, momentum, and price trajectory. This article explores the current technical and fundamental landscape influencing the EUR/USD pair in mid-August and whether a break of the 1.1780 handle could significantly redefine the short-to-medium term outlook.
Current Technical Outlook
The EUR/USD pair has been trading in a relatively narrow band throughout the previous trading sessions, hovering around the 1.1720–1.1760 range. One of the primary technical features that traders are watching is the convergence of the 1.1780 resistance level with several longer-term trendlines.
Key technical indicators include:
– The 200-day moving average (MA) sitting close to 1.1775, providing dynamic resistance.
– The 1.1780 horizontal resistance level, previously acting as a pivot point during June and July, now seen as a major hurdle.
– The Relative Strength Index (RSI) remains in neutral territory, indicating potential room for an upside breakout if momentum builds.
– Fibonacci retracement levels from earlier declines show that 1.1780 marks a 61.8% retracement from a previous move lower, adding to its significance as resistance.
Short-Term Momentum Signals
Short-term charts suggest that momentum is gradually building in favor of more euro gains. The latest 4-hour and daily candlestick patterns reveal a sequence of higher lows, indicating limited seller conviction. Moreover, intraday volatility remains subdued, often a precursor to a larger directional move.
Market participants note that:
– Price action has consolidated directly below resistance, implying reduced selling pressure and potential accumulation.
– Volume analysis shows increased buying activity during dips, reinforcing bullish sentiment.
– A potential bullish crossover of short- and mid-term moving averages may add to the momentum.
If the pair manages to break decisively above 1.1780, this could catalyze further technical buying, with the next resistance levels found around:
– 1.1815: Previous multi-week high
– 1.1850: Minor resistance from early July
– 1.1900: Psychological round number and longer-term target
Fundamental Drivers to Watch
Beyond the technical signals, several fundamental catalysts may shape the EUR/USD outlook over the next few sessions. Both the Eurozone and the United States are facing evolving economic landscapes, each with unique risks and opportunities influencing their respective currencies.
1. US Dollar Weakness on Dovish Fed Expectations
A major driver behind recent dollar softness has been the mounting expectation of a more dovish stance from the Federal Reserve. Inflationary pressures in the US appear to be easing, while labor market growth has shown signs of deceleration.
Recent US economic data includes:
– CPI data showing declines in core inflation, prompting speculation that further rate hikes may not be necessary.
– Weaker-than-expected Non-Farm Payrolls growth and moderating wage increases.
– Fed Chairman Jerome Powell’s latest remarks, which acknowledged the progress in tackling inflation and emphasized data dependency going forward.
All these factors have contributed to a reevaluation of the US interest rate outlook, with futures markets now pricing in a higher probability of the Fed pausing or even cutting rates in early 2025.
2. Eurozone Outlook Stabilizes
Meanwhile, economic conditions across the euro area have begun to stabilize. While the bloc still faces challenges such as high energy prices and structural constraints, recent data shows tentative signs of recovery.
Positive developments include:
– Eurozone composite PMI improving from previous lows, led by a rebound in the service sector.
– Industrial production figures from Germany exceeding consensus forecasts for
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